A new UK study has found that denying asylum seekers work rights and making them reliant on hand-outs is costing Britain millions of pounds each year.

Instead, asylum seekers and their families, many of whom live in near destitution, having to resort to foodbanks, could be contributing £42 million ($A77 million) to the British economy if allowed to work.

The research, by a coalition of 65 humanitarian sector organisations called ‘Lift the Ban’, found that if half of people seeking asylum earned a national average wage, £42.4m would be recouped by the government each year through tax and national insurance payments, as well as and the saving on financial support.

The study also shows that the British public is in favour of lifting the ban, with 71 per cent agreeing that people seeking asylum should have the right to work.

Lift the Ban argues that the current system is unfair as people can wait years for a decision on their refugee protection status, unable to work and pushed into poverty and isolation.

It says that work bans punish refugees who have been through traumatic experiences and rather than allowing them to work and integrate into British society, the policy keeps thousands of people in limbo, living in deprived conditions, set apart from mainstream society.

The study found 94 per cent of surveyed asylum seekers were desperate to work.

Instead, they subsist on £5.39 ($A9.89) a day for all living costs, including food, clothes, toiletries and transport. Many struggle to support themselves and their families, turn to foodbanks and become homeless.

The Red Cross reported recently that the number of refugees and asylum seekers living in food poverty in Britain had increased by 20 per cent in the past year.

The current ban is more punitive than any other European country, or the US or Canada, none of whom come close to stopping asylum seekers for working for as long.

Only those in niche professions on a shortage list are allowed to work after they have been waiting 12 months.

The researchers found that of 36 asylum seekers who had applied for permissions to work under the skill list after waiting 12 months, only eight were granted permission with just two people actually finding jobs.

Meanwhile, victims of modern slavery who have escaped their abusers are being drawn back into exploitation as a means of survival, following cuts to their financial support, according to media reports in the UK this week.

Asylum seekers believed to have been trafficked into the UK are due to have their weekly subsistence rate reduced from £65 to £37.95 ($A67).

The reports say victims whose support has been reduced struggle to afford basics such as food and travel, placing them at high risk of being re-exploited financially, sexually and emotionally.

A case currently before the UK’s High Court is challenging the government’s decision to cut subsistence rates.

The UK government identifies and supports victims of trafficking through the National Referral Mechanism (NRM), which requires the Home Office to provide support to aid recovery and house them in “safe house” accommodation if required.

But advocates say cuts to the subsistence payment would put these people at risk.

Leading UK trade unionist and a member of the Lift the Ban coalition, Frances O’Grady said the work ban for asylum seekers was “cruel and self-defeating”.

“We shouldn’t be wasting the talent and skills of these workers. People seeking asylum must be given the right to work and contribute. These damaging restrictions are in no-one’s interest,” she said

A statement from Britain’s Home Office said: “Once an individual has been granted protection, they have immediate and unrestricted access to the labour market”.

“However, asylum seekers are not normally allowed to work while their asylum claim is determined, this is to protect the resident labour market and ensure access to employment is prioritised for British citizens and those lawfully resident here, including refugees.

“Those who would otherwise be destitute are provided with free, furnished accommodation and are provided a cash allowance to cover other essential living needs.”